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Thursday, June 30, 2016

Trump and China

Trump and China

Trade with China has led to the loss of manufacturing jobs in the
United States and put downward pressure on wages for blue-collar jobs
here. This is a real problem and campaigns in both political parties are
grappling with how to address it. In a speech this week, Donald Trump
proposed high tariffs on imports of Chinese goods, labeling the country a
“currency manipulator,” and ripping up the Trans-Pacific Partnership
(TPP). These measures are not likely to reverse the damage that trade
has done to blue-collar workers in the United States.
First, on high tariffs: There is a long-term trend for manufacturing
employment in the United States to decline as a share of employment.
This reflects the fact that automation and productivity growth are
easier in manufacturing than in services. The United States is still a
manufacturing powerhouse from the point of view of production, but it
simply does not take that many workers to produce the output. Trade with
China accelerated that trend, and that was bad for the United States
because slow adjustment is easier than the rapid adjustment that
occurred. But imposing tariffs on Chinese imports now is truly closing
the barn door after the horse has left. Jobs in apparel and footwear or
the low end of electronics are not coming back to the United States.
Tariffs aimed at China will divert that production to other developing
countries. If we try to keep out imports from all of the low-wage
countries then we are contemplating an end to the open trading system
that has been a source of political and economic stability in the world.
Economic results for the United States are not likely to be good even
if there is no retaliation. But there is almost certain to be
retaliation, especially from China which is a powerful and nationalistic
country.http://www.brookings.edu/blogs/order-from-chaos/posts/2016/06/30-trump-and-china-dollar